Sanlam’s “transformative” joint venture with Europe’s largest insurer, Allianz, has been in the making for at least a decade, with on and off informal discussions between the parties over the years, the venture’s new CEO, Heinie Werth, has revealed.
The closure of the deal on Tuesday marks a major coup for Sanlam boss Paul Hanratty, who has accomplished what some of his predecessors could no’t — taking the group to the coveted Egypt market, which the joint venture opens for the group.
Werth, now Sanlam emerging markets CEO, said the tie-up with Allianz pools most of their businesses on the continent to create a financial services partnership worth about R35bn and is a win-win for both parties.
“From a shareholder perspective, the deal is transformative for Sanlam and Allianz in different ways. Sanlam has always had a clear ambition to be a leading player on the African continent. For that, you really need scale and diversification. Though Sanlam was already present on the continent, this deal really helps us with scale with the addition of the Allianz business and adds Egypt to the Sanlam footprint,” Werth told Business Day.
“Allianz was very clear that they have a long-term strategy for Africa and they preferred to partner with a strong firm. So, from their side, they have also achieved their objective. They want to remain on the continent and for them Sanlam gives them that partnership they were looking for.”
Sanlam, worth about R155bn on the JSE, has had a long-standing desire to expand into Egypt and was at one point looking to take an equity stake in an undisclosed Egyptian player.
Revenue jumped
With a population of more than 100-million people and an annual population growth of 1.7%, Egypt has become an attractive market, particularly for SA businesses.
SA’s biggest mobile phone operator, Vodacom, recently reported a jump in revenue, helped by the acquisition of Vodafone Egypt. Vodacom completed the acquisition of Vodafone Egypt in December for R42bn.
The joint venture, known as SanlamAllianz, will operate in 27 countries, excluding SA, for at least a decade. Sanlam will continue to operate on a stand-alone basis in SA.
Werth said discussions between Sanlam and Allianz have been in the making for many years and that one of the main drawcards for Sanlam was getting exposure to the Egyptian market.
“You have to be in all the big economies in Africa, and Egypt falls into that category. It was always difficult to get into Egypt, particularly on our own and be a top-three player in that market. By joining forces with Allianz it gives us that top-three position.”
Sanlam was initially meant to hold 60% of the joint venture, with the balance falling into the hands of Allianz. But Sanlam said on Tuesday the split could still be adjusted.
Hanratty, who was appointed as Sanlam group CEO in 2020, said the tie-up will provide greater economies of scale, broader geographic presence and diversification, a bigger combined market share and a more diversified product offering.
Industry scrambles
“We are confident that SanlamAllianz will create significant value for clients, shareholders and other stakeholders. The combined expertise and resources of our respective companies will enable us to provide innovative solutions and services to meet the ever-evolving needs of our clients on the African continent,” Hanratty said.
The deal comes as the insurance industry scrambles to adapt to the disruption caused by the rapid advance of financial technology, which has enabled more players to enter the space.
Sanlam has life and general insurance, as well as investment management operations in more than 30 countries, including Morocco, Ivory Coast, Nigeria and Botswana.
Germany-based Allianz’s insurance portfolio spans 11 countries, including operations in Egypt, Kenya, Cameroon and Uganda.
Werth credited Hanratty with seeing the deal through.
“The deal got momentum three years ago. Even previous CEOs of Sanlam and Allianz have talked about the potential of this venture over the years. When Paul started as CEO, he took the discussions to the next level,” he said.
“It was a complex deal. To bring 27 countries together, we had to go through many regulators.”
Broader offering
The joint venture is expected to be ranked among the top three insurers in most of the markets where it will operate.
Christopher Townsend, board member of Allianz, said retail and corporate clients will benefit from a broader offering of insurance products.
Sipamla Radebe, investment analyst at Mergence Investment Managers, said the transaction is positive for Sanlam as it is the “most efficient method of gaining significant presence and scale across the major African insurance markets in both the life and nonlife segments as the JV [joint venture] will hold significant market shares across various geographies, offering significant growth potential and low insurance penetration levels”.
He said the transaction is the most cost-efficient method in gaining scale on the continent from a capital and time perspective, as organic growth requires significant deployment of capital and resources as well as time for operations.
In a separate announcement, Sanlam’s short-term insurance arm, Santam, said it has sold its 10% interest in the privately owned SAN JV to Allianz in a R2.6bn deal that will be returned to Santam shareholders as a special dividend.
Update: September 5 2023
This story has been updated with new information.
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